Thursday, September 16, 2010

Competitive Bidding Experts Describe Flaws in Medicare Bid Program and CBO Savings Number

Inside Health Policy, a Washington newsletter, reported on September 14 that, “Independent experts on competitive bidding say CMS’ durable medical equipment bidding program is uniquely designed to set prices below a level at which many winning bidders can afford to participate, which likely will lead to product shortages.”

The article describes three “fatal” flaws with CMS’ program outlined Peter Crampton, a professor of economics at the University of Maryland: “bids are not binding, CMS sets reimbursement at the median price among winning bidders and only CMS knows how the winners were chosen…. CMS will not disclose how it determines the amount of product that each bidder is expected to supply. It’s unclear who the winning bidders are, even though bidding took place more than 10 months ago.”

Crampton along with Brett Katzman, an economics professor at Kennesaw State University in Georgia, plan to meet with the Congressional Budget Office to urge the CBO to re-estimate the potential savings from the bidding program, which Katzman describes as “drastically overstated.”

The article notes, “Apart from being professors, [Crampton and Katzman] are paid to set up competitive bidding programs. No other competitive bidding program, for any product in either the private or public sector, uses the design that CMS came up with, they said.”